Political economy of the concept of Export Processing Zones and its contribution to the national economy Kazal Asgar Deputy Manager (Enterprise Services) Bangladesh Export Processing Zones Authority (BEPZA) Dhaka BEA Membership no. 2516 After liberation the newly independent Bangladesh aspired to boost up its economy through industrialization. In view of the growing need of attracting foreign and local investment, the concept of Export Processing Zones (EPZs) established to enhance investment, employment, export, to transfer technology and earn foreign exchanges. By this way in 08 (eight) EPZs now there have total 555 industrial enterprises where only 430 are in operation. The cumulative investment in these is US$ 3,188.07 million and almost 3,89,017 Bangladeshi people are employed in the EPZ enterprises. The cumulative export from the EPZs is US$ 40,027.67 million. Centering an EPZ, the economy sets up backward and forward linkages and supportive service industries which create employment opportunity especially for women and overall industrial localization. In this way it contributes to alleviate poverty and inequality creating an economy for the mass people. Bangladesh has 08 (eight) EPZs under the regulation of Bangladesh Export Processing Zones Authority (BEPZA) as mentioned in the below table: No. Name of EPZ Year of establishment Where it is 1 Chittagong EPZ 1983 Halishohor, Chittagong 2 Dhaka EPZ 1993 Ashulia, Dhaka 3 Comilla EPZ 2000 Comilla Town 4 Ishwardi EPZ 2001 Pabna 5 Uttara EPZ 2001 Nilphamari 6 Mongla EPZ 1999 Mongla, Bagerhat 7 Adamjee EPZ 2006 Siddirgonj, Narayangonj 8 Karnaphuli EPZ 2006 Potenga, Chittagong Out of these the four i.e. Comilla EPZ, Ishwardi EPZ, Uttara EPZ and Mongla EPZ are established during the regime of 1997 to 2001. The new zone named as ‘Economic Zone’ is conceptualized in recent times which are in pipeline. The Cost Benefit analysis in this sector during the last five financial years During the financial years from 2009-2010 to 2013-2014 the economic prudence of the government helped to achieve a remarkable growth in Investment, Export and Employment compared to the period of previous regimes at the cost of providing some incentives. Investment In July, 2014 the total amount of actual investment in BEPZA stands at US$ 3,244.34 million. A total of 37 countries including S. Korea, Japan, China, Malaysia, Taiwan, U.S.A, U.K, Italy, Canada, Netherlands, Germany, British Virgin Island, India, Sweden, Singapore, Pakistan, Panama, Switzerland, Belgium, Denmark, France, Thailand, Sri Lanka, Indonesia, Australia, Nepal, Mauritius, Ireland, U.A.E., Turkey, Ukraine, Marshal Island, Kuwait, Rumania, Malta, Spain and Bangladesh have already invested in the EPZ’s of Bangladesh. During the last five financial years the net investment (foreign and local) in EPZs has been increased about US$ 1,605.59 million. Financial Year Actual investment Financial Year Actual investment (M US$) (M US$) 2009-2010 221.99 2004-2005 118.52 2010-2011 313.23 2005-2006 112.89 2011-2012 339.26 2006-2007 152.37 2012-2013 328.53 2007-2008 302.19 2013-2014 402.58 2008-2009 148.03 Total 1,605.59 834.00 During last five years the investment flow in the EPZs was on an upward trend then the same in previous five years. The political stability, investment friendly atmosphere and the good service provided by the EPZ authority attracted the investors to invest in EPZs. The growth rate of the investment in this time was also positive. Export The export earnings were worth US$ 21,112.64 million in the last five years and it was increasing per year. But in previous five years this figure was only US$ 10,459.82. Financial Year Export Financial Year Export (M US$) (M US$) 2009-2010 2,822.54 2004-2005 1548.68 2010-2011 3,697.62 2005-2006 1836.18 2011-2012 4,210.80 2006-2007 2063.67 2012-2013 4856.68 2007-2008 2429.58 2013-2014 5525.00 2008-2009 2581.71 Total 21,112.64 10,459.82 The export growth between the two regimes was 101.8% that means it has jumped almost more than double. Contribution of EPZ in National Export The contribution of EPZs to the national export volume is increasing every year with the increase of export. The national export in 2009-2010 financial year was US$ 16,250 Million where the contribution from only eight EPZ in that year was 2,822 . In subsequent years the national export was increasing and alongwith this the export from EPZ enterprises was also increasing. Year Total Export of Total Export of EPZS BEPZA’s Bangladesh (US$m) (US$m) Contribution (%) 2004-2005 8655 1549 17.90 2005-2006 10526 1836 17.44 2006-2007 12178 2064 17.00 2007-2008 14111 2429 17.22 2008-2009 15560 2582 16.60 2009-2010 16250 2822 17.36 2010-2011 22924 3698 16.13 2011-2012 24410 4210 17.24 2012-2013 27018 4856 17.97 2013-2014 30176 5525 18.30 During the whole period it was contributing about 17% to 18% in the national export volume. Employment There 132 new industrial enterprises have got permission to set up in the EPZs during FY 2009-2010 to FY 2013-2014. About 154,324 Bangladeshi nationals have directly employed in this period which is 61.24 % higher than that in previous five years. Financial Year Employment (Person) Financial Year Employment (person) 2009-2010 28,064 2004-2005 15,802 2010-2011 43,666 2005-2006 23,021 2011-2012 33,598 2006-2007 23,360 2012-2013 33,987 2007-2008 17,130 2013-2014 15,009 2008-2009 16,394 Total 154,324 95,707 During 2004 to 2009 the employment was quite stagnant around 15 to 16 thousand. But during immediate past five years this figure has been jumped from 28 to 43 thousand people. Role of EPZs in Women Empowerment A large number of female workers are working in the EPZs- the percentage of female workers stands at about 64% of the total number of employees. The employment patterns in BEPZA show that the EPZs have been making a significant contribution to the gradual empowerment of women. Every year an increasing number of young girls and woman are joining in the productive workforce of EPZs. BEPZA is going to implement a project titled “Northern Area Reduction of Poverty Initiative (NARI)” with a plan to create dormitories and training institutes in three EPZs viz; Dhaka, Karnaphuli and Ishwardi. Under this project female workers will be given accommodation, training and provided employment in RMG industries operating inside EPZs. About 64% of the total workforce in EPZ enterprises is women. Due to remarkable contribution in women empowerment the authority i.e. BEPZA achieved second runner up position in IFC CEO Gender Award. Role of EPZs in digitalization With a view to digitalization, the regular Export Permissions and Import Permissions are now operated through automation. To become the active partner of “Digital Bangladesh”, BEPZA has streamlined its activities by reducing reliance on paper documentation. BEPZA is now working to automate three priority processes: the acceptance, screening and approval of applications for import permits, export permits & sub- contract permits. In October 2009, Chittagong became the first EPZ to become automated, with Dhaka following suit in June, 2010 and Karnaphuli in July, 2013. To ensure overall automation BEPZA has set up Video Conferencing between the zones, LAN and WAN connectivity, and also an updated website. Role of EPZs in per capita income About 4 lakh people are working directly in EPZ enterprises. With their family members (suppose 4 in a family) the beneficiary is almost 16 lakhs. Creating informal business sector around the EPZ area it generates more employment and more income. In this way by creating industrial localization, the per capita income of poor people increases and indirectly helps in poverty alleviation. Role of EPZs in poverty alleviation From the very beginning EPZs are such a concept which helps in industrialization, creating employment opportunity. Centering an EPZ a business cluster established in nearby area. Some formal and many informal entrepreneurs have grown up depending on EPZs in Bangladesh. The people in Nilphamari, a backward northern area in Bangladesh is now working at enterprises in Uttara EPZ. A transport business alongwith petrol pump station has grown up there to carry the workers. Many grocery shops, hotel and restaurant business rises in nearby area of EPZ. Some luxurious hotel established for foreign investors there. In this way many poor people, especially women are now solvent. They send their children to school now. They eat better, put on better and dream better. There is a poverty reduction project in Uttara EPZ named Northern Area Poverty Reduction Initiatives (NARI) funded by World Bank. This project is being implemented to train up the raw workers for EPZ enterprises and improves their lifestyle. Diversification of products The EPZ enterprises have contributed significantly in terms of export diversification of the country. From the EPZs, every year various types of products are exported to many countries of the world. The list of diversified export items from EPZs includes:- Garments Accessories, Textile, Tent, Tent Accessories, Electrical equipment and components, LED lamp and Selection Button, Furniture , Bi-cycle, Cosmetic and Hollywood mask, Optical goods, Automobile Parts, Engineering products, Leather products and Footwear, Battery, Camera & camera lens, Mobile Parts, Gold and diamond jewelery, Bag, Luggage, Thermal bag, Sleeping Bag, Camping Furniture, Electronic products, Golf shaft, Wig and fashion hair, Jute products, Cosmetics and Hollywood mask, Energy saving bulbs, Metal products, Toys, Eye -glass and Frame, Carpet, Chopsticks, Bamboo made Coffin, etc. Power Plants BEPZA has executed the Power Supply Agreements with 06(six) private companies for producing and supplying of 290 (Two hundred and ninety) Megawatts electricity to the enterprises in 06 EPZs.